Performance management is one of the hottest topics among senior finance executives and the analysts and vendors who serve them. Simply put, it’s a set of processes, metrics, methodologies, and software tools that allow an organization to forecast, measure, and react to various business drivers and performance indicators — all in the service of its overall business strategy.
Performance management software systems — like individual scorecards, reports, forecasts, or key performance indicators — are only one component of a performance management initiative. But successful implementation of a performance management software system is critical to the success of the initiative as a whole. These sophisticated tools, when designed and implemented correctly, are the glue that holds a performance management initiative together — providing the tight integration between performance management components that many senior executives we interviewed say is necessary for success.
We launched a research program in September 2005 to investigate the next piece of the story: How can companies that are implementing performance management systems make them work to best advantage? Through a series of interviews with senior finance executives, we gathered advice on how to successfully manage implementation projects, focusing in particular on staffing the implementation team, designing performance management systems to reflect company strategy, and managing change within the organization.
This report represents the findings of our in-depth interviews with senior finance executives at the following companies:
• Agilent Technologies
• Eastern Mountain Sports
• Erickson Retirement Communities
• Heineken U.S.A.
• Jane Goodall Institute
• Jim Beam Brands
• Neal & Massy Holdings Ltd.
• Russell Corp.
• Sodexho U.S.A.
• WellCare Health Plans, Inc.
Building Business Strategy into Performance Management
The executives we interviewed say the right leadership helped their companies get buy-in and group consensus on the performance management project. But equally important is deep business expertise and operations experience among implementation team members. Such expertise and experience, say executives, help companies design systems that measure the right financial and operational activities. By doing so, companies equip their planning and operating staff to budget and forecast more effectively, and to execute activities in alignment with business strategy.
Performance management tools certainly can help companies craft their business strategies more easily and with greater confidence — freeing them from worrying about data gathering and data integrity, and giving planners from diverse areas of the business more room to apply their analytic know-how. Don Rodgers, corporate controller at Jim Beam Brands, says: “Preparing our strategic plan used to be a very long and cumbersome process. Now marketing is working on strategic plans for branding, our salespeople are working on their strategic plan, and also finance people are working on theirs. We just pull the three together in the system and then we can discuss the differences. The beauty of our tool is that it gives us data integrity — the numbers are current, and everyone is working from the same ones.”